Capital Costs

Feb 24, 2013 (LBO) – An upgrade to Sri Lanka’s 50,000 barrels refinery a day involving doubling of is capacity and boosting light distillate yields could cost up to 1.5 billion US dollars, officials said. Petroleum minister Anura Yapa told reporters Saturday that feasibility and front-end-engineering-design (FEED) has already been completed for the project.

Sri Lanka’s only refinery owned by state-run Ceylon Petroleum Corporation was built in the 1960s and yields a low proportion of light distillates and higher proportions of furnace oil compared to technology available today.

When crack margins (the gap between crude and refined products) narrow it is sometimes saves money for the country to shut the refinery and import refined products direct.

But a tax on refined products has created conditions for a seeming economic viability for the refinery.

Sri Lanka has been attempting upgrade the refinery by applying new technology such as hydro cracking, but the project is expensive.

Ceylon Petroleum Corporation chief executive Susantha Silva said Sri Lanka was now selling petrol and diesel with a lower level of sulfur than when the refinery started.

The refinery had been fine-tun